The three-year decline in earnings might be taking its toll on Reliance Industrial Infrastructure (NSE:RIIL) shareholders as stock falls 10% over the past week

While Reliance Industrial Infrastructure Limited (NSE:RIIL) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 22% in the last quarter. But over the last three years the stock has shone bright like a diamond. Indeed, the share price is up a whopping 304% in that time. Arguably, the recent fall is to be expected after such a strong rise. The thing to consider is whether there is still too much elation around the company's prospects.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

View our latest analysis for Reliance Industrial Infrastructure

Given that Reliance Industrial Infrastructure only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Reliance Industrial Infrastructure actually saw its revenue drop by 5.6% per year over three years. So it's pretty amazing to see the stock price has zoomed up 59% per year in that time. There can be no doubt this kind of decoupling of revenue growth and share price growth is unusual to see in loss making companies. So there is a serious possibility that some holders are counting their chickens before they hatch.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Reliance Industrial Infrastructure's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Reliance Industrial Infrastructure the TSR over the last 3 years was 310%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Reliance Industrial Infrastructure shareholders have received a total shareholder return of 3.7% over one year. Of course, that includes the dividend. However, that falls short of the 13% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Reliance Industrial Infrastructure (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

We will like Reliance Industrial Infrastructure better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.